Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 

Cullen Fund Makes No Sense -- Brash

Don Brash
National Party Candidate

18 July 2002

Cullen Fund Makes No Sense -- Brash

“The Labour/Alliance Government‘s promotion of the fundamentally-flawed Cullen Fund as its answer to New Zealanders’ future retirement needs is a serious mistake,” says National Party candidate Don Brash.

Dr Brash told the annual convention of the Financial Planners and Investment Advisers Association today that the Cullen Fund made little sense.

“It is not clear to me why it makes sense for the Government to be investing in overseas shares and bonds, while at the same time increasing its borrowing in New Zealand.

“No fund manager worth their salt would advise a private individual to invest in overseas shares before the individual’s home mortgage has been repaid. No investment in overseas shares can give a risk-adjusted after tax rate of return equivalent to the return gained from retiring debt.

“Why then does it make sense for Government to invest overseas before retiring its debt – indeed while still increasing its debt?”

Dr Brash says because the Cullen Fund will absorb large amounts of cash for a number of years, at a time when the Government is also undertaking a substantial investment programme, it will have to borrow substantially more than would otherwise be the case.

“The Government has marketed the Cullen Fund as in some way providing a high degree of certainty for funding future superannuation. But it will only make a small contribution – providing around 10 per cent of the cost of NZ Superannuation over the years the fund will be drawn down.

“However, by creating the illusion of certainty the Cullen Fund may well have a quite perverse effect on private sector saving behaviour. Treasury warned the Government of this risk when the scheme was first being discussed and there are signs it may already be having this effect.

Dr Brash says the fundamental ability to pay for New Zealand Superannuation in 20 or 30 years’ time depends on the size of the economy at the time.

“If it was really such a good idea to fund future Government spending by investing in overseas sharemarkets, somebody would surely have thought of it long ago. The Cullen Fund looks like a serious mistake to me.”

Ends

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Veronika Meduna: The Kaikoura Rebuild

A Scoop Foundation Investigation

Friday will be a big day for people north of Kaikōura – and for hundreds of construction workers who are racing to reopen State Highway 1 in time for the holiday season.

By the afternoon, the South Island’s main transport corridor will be open to traffic again, more than a year after a magnitude 7.8 earthquake mangled bridges and tunnels, twisted rail tracks and buried sections of the road under massive landslides. More>>

 

BPS HYEFU WYSIWYG: Labour's Budget Plans, Families Package

“Today we are announcing the full details of the Government’s Families Package. This is paid for by rejecting National’s tax cuts and instead targeting spending at those who need it most. It will lift 88,000 children out of poverty by 2021." More>>

ALSO:

Gordon Campbell: On Defence Spending, Alabama, And Dolly Parton

The spending lavished on Defence projects to meet the risks that could maybe, possibly, theoretically face New Zealand in future is breath-taking, given how successive governments have been reluctant to spend even a fraction of those amounts on the nation’s actual social needs. More>>

ALSO:

Members' Bills: End Of Life Choice Bill Passes First Reading

The End of Life Choice Bill in the name of David Seymour has been sent to a select committee for consideration by 76 votes to 44. It is the third time Parliament has voted on the issue in recent decades and the first time such a Bill has made it over the first hurdle. More>>

ALSO:

State Sector: MPI Survives Defrag Of Portfolios

The Ministry for Primary Industries will not be split under the new government, but will instead serve as an overarching body for four portfolio-based entities focused on fisheries, forestry, biosecurity and food safety. More>>

ALSO:

Gordon Campbell: On Vulnerable Kids, RNZ Funding, And Poppy

The decision to remove the word ‘vulnerable’ from the Ministry for Vulnerable Children could well mark a whole shift in approach to the care of children in need... More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

Featured InfoPages